Do independent director norms need review? ‘Not really,’ says Sebi chief

With the role of independent directors coming into focus amid the Tata-Mistry row, markets watchdog Sebi’s Chairman U K Sinha on Thursday said there were “no compelling” reasons to review the norms regulating such board members.

“The appointments, sacking and role of independent directors is prescribed in the Companies Act as well as Sebi regulations. Sebi regulations in this regard are more tighter than those under Companies Act,” Sinha told reporters on the sidelines of AIBI summit on ‘Indian capital markets’.

“There is always need to review norms. But at this stage I don’t see any compelling need to review them,” he said.

The comments come in the back drop of heated debate on the role of independent directors in the Tata-Cyrus Mistry row wherein the conglomerate has moved a proposal to remove Nusli Wadia, an independent director, from the board of atleast three group companies. The Tata Sons’ move came in response to independent directors supporting Cyrus Mistry, and the issue has also raised question marks over the independence of such directors in voicing their views.

Asked about listing of domestic stock exchanges in the overseas market as proposed by the National Stock Exchange (NSE), Sinha said “an exchange in India as per our regulations cannot list outside India”.

On progress in options trading in commodities, he noted that “this a new area and the first thing for all members of the advisory committee is how do we initiate a system where risk parameters are fully taken care of”. “And we also have to ensure that the risk parameters are of highest world standards. This is a complex task and Sebi will be looking at all the views and then finally taking a call,” Sinha said.

In a major push to deepen the commodity derivative markets, the Sebi had in September allowed options trading.

With the primary markets showing strong revival on conducive regulatory norms, Sebi chairman UK Sinha on Thursday said NRIs have begun to show interest to tap the domestic capital markets to raise funds.

Sinha noted that the number of IPO issuances in the last three years and the amount raised is going up in a healthy manner, helped by stringent disclosure norms issued by the Sebi. Observing that the IPO pipeline going forward seems strong, he said only 11 IPO filings are pending with the Securities and Exchange Board now.

“Many NRIs, especially those in the Gulf countries, are looking for listing their companies on the domestic bourses rather than going to other parts of the world,” Sinha said at a summit organised by the Association of Investment Bankers of India (AIBI).

According to him, while 17 out of the 25 companies which launched their initial share sales in the current fiscal are trading above the issue price, there is a need to analyse the reason behind why the remaining eight companies are trading below the issue price.

“The balance eight issues even, when they were oversubscribed in the IPOs, are still trading below the issue price. We need to look at if there is something missing and is there something wrong in the system,” he said.

Noting that the SME IPOs are also gaining momentum, he said, “The experiment of SME listing has been successful. We have seen almost 200 companies have got listed on the SME platforms of the BSE and NSE, and I believe another 200 companies are lined up.” 

However, the Sebi chief expressed disappointment that not a single startup has approached the regulator for listing on the exchanges even as it has come out with relaxed norms for such companies.

Sinha observed that while various suggestions have come forward with regard to promote listings of start ups, many of them are “ornamental” in nature.